The
court
ruling
stems
from
a
2013
case
in
which
the
SEC
brought
civil
fraud
charges
against
hedge
fund
manager
George
Jarkesy,
accusing
him
and
two
alleged
collaborators
of
defrauding
investors.

In
response,
Jarkesy
sued
the
SEC,
saying
that
the
in-house
enforcement
process
was
a
violation
of
his
rights
under
the
Seventh
Amendment
to
the
U.S.
Constitution,
which
protects
the
rights
of
the
accused
to
a
civil
trial
in
federal
court.

The

Fifth
Circuit
Court
of
Appeals
sided
with
Jarkesy
and
the
matter
was
then
appealed
to
the
Supreme
Court,
which
agreed
with
Jarkesy’s
constitutional
argument.

“[W]hen
the
SEC
adjudicates
the
matter
in-house,
there
are
no
juries,”
Chief
Justice
John
Roberts
wrote
in
an

opinion
delivered
for
the
majority.
“Instead,
the
Commission
presides
and
finds
facts
while
its
Division
of
Enforcement
prosecutes
the
case.
The
Commission
may
also
delegate
its
role
as
judge
and
factfinder
to
one
of
its
members
or
to
an
administrative
law
judge
that
it
employs.”

This,
Roberts
wrote,
is
not
in
alignment
with
the
Seventh
Amendment.

“This
case
poses
a
straightforward
question:
whether
the
Seventh
Amendment
entitles
a
defendant
to
a
jury
trial
when
the
SEC
seeks
civil
penalties
against
him
for
securities
fraud,”
Roberts
wrote
in
part.
“The
threshold
issue
is
whether
this
action
implicates
the
Seventh
Amendment.
It
does.
The
SEC’s
antifraud
provisions
replicate
common
law
fraud,
and
it
is
well
established
that
common
law
claims
must
be
heard
by
a
jury.”

The
case
was
decided
6-3
along
the
ideological
lines
of
the
court.
Justices
appointed
by
Republican
presidents
(Roberts,
Samuel
Alito,
Amy
Coney
Barrett,
Neil
Gorsuch,
Brett
Kavanaugh
and
Clarence
Thomas)
ruled
in
favor
of
Jarkesy
while
justices
appointed
by
Democratic
presidents
(Elena
Kagan,
Ketanji
Brown
Jackson
and
Sonya
Sotomayor)
sided
with
the
SEC.

The
high
court
has
heard
several
recent
cases
challenging
federal
regulatory
authority,
most

recently
deciding
that
the
funding
structure
of
the


Consumer
Financial
Protection
Bureau
(CFPB)
was
constitutional.
But
changes
to
certain
processes
at
federal
agencies
could
have
broader
implications
for
other
agencies.

For
instance,
when
the
court
decided
roughly
five
months
before
the
2020
election
that
the
CFPB
director

was
not
insulated
from
firing
by
the
president,
a
successful
subsequent
case

invalidated
a
similar
structure
at
the

Federal
Housing
Finance
Agency
(FHFA).

Soon
after,
the
Biden
administration
seized
on
that
decision
to
force
the
Donald
Trump-appointed
Mark
Calabria
out
of
the
FHFA’s
leadership
post
and

chose
Sandra
Thompson
to
replace
him.